COOL Means Australian Beef Replaces Canadian Beef in U.S. Markets

[farmers_son]

My most recent update from Meat and Livestock Australia states "[Australian] exports to the US reached 27,776 tonnes swt during October, up 2% year-on-year and the highest monthly volume since May 2007." It certainly appears to me that any shortage of U.S. beef supply that would have resulted from reduced Canadian live cattle and beef exports to the U.S. in October due to the implementation of COOL on October 1 are being made up by increased Australian beef imports.

This does not surprise me. And it should not surprise U.S. cattle producers. U.S. cattle producers who lobbied for Mandatory Country of Origin Labeling were shooting themselves in the foot and they should have seen that. COOL would not significantly affect Australian imports which were going to institutional and restaurant trade anyway but dramatically affect Canadian live cattle and beef imports which now have be segregated with reduced access to U.S. packing plants. The net result is increasing market share for Australia and reduced market share for Canada.

At some point the U.S. producer is going have give some thought to who would they rather have in their market. Canadian cattle producers with a similar production system with similar costs or maybe even higher costs? Or would U.S. producers rather seek to strengthen the hand of global competitors like the Australians and even Brazilians who have lower cost production systems.

The U.S. will remain the worlds number one importer of beef in any event but it seems to me that the U.S. cattle producer should give some thought to where they would rather see that beef come from.

[kato]

Good point. You should post it on Ranchers.net.

[grassfarmer]

Farmers_son, Just as you always tell us beef producers sell live cattle not beef I think it is important to realise that producers do not import beef or decide where it comes from. These decisions are made by the retailers and global "protein distributers" like Cargill, Tyson and JBS.
I actually don't think most US producers could give two hoots whether their beef imports come from Australia or Canada but Canada has the disadvantage of being more visible due to the liner loads of liner heading south versus a few anonymous containers of Australian beef being offloaded at the pacific ports. I think you need to get the mistaken belief out of your head that somehow the US holds Canada in special regard and will favor our beef imports over all others - history indicates this is not the case. They are the bully, we the bullied, to be used and discarded as necessary.
The biggest mistake you make is to talk about Canadian, American, Australian and Brazilian producers as if we are all controlling what we export and should decide what goes where. In reality 3 or 4 corporations control the bulk of beef production in all these countries and use that power to manipulate market price for live cattle in every country.
Until you/ABP accept the fundamental truth that the "beef industry" is packer run not producer run you won't be able to see the wood for the trees.

[farmers_son]

Whether the beef industry is packer or producer run (or even government run), the fact remains that at least some U.S. cattle producers were lobbying for COOL. And their government listened.

And maybe U.S. cattle producers and U.S. politicians should start giving two hoots about where they are sourcing their needed imports because the future of not only the U.S. cattle industry but the North American cattle industry is potentially at stake.

Whether by accident or design, COOL impacts Canadian cattle producers far more than any other nation. And no doubt there are some U.S. politicians that are slapping each other on the back and saying job well done.

But longer term the unintended consequences of COOL will be significantly increased U.S. market share for non NAFTA beef (countries like Australia, Brazil, Argentina) that will drive down U.S. live cattle prices. They would have been better off working with Canadian producers who share a common cost structure.

[wilagro]

Why doesn't Canada have its own COOL? Quite a bit of beef from the USA USED to flow into Ontario. Is this still the case? Would our own COOL lead to customer preference for Canadian beef? Would it cause the USA to re-think their policy about COOL? Would it make ANY difference at all in the grand scheme of things?

Many years ago when I was a meat cutter, MOST of the pork loins that we used came from the USA because they were cheaper. The Canadian consumer had NO idea that they were eating imported pork and NOBODY told them either. Had we had our own COOL at the time there might have been some consumer resistance to buying imported product when we produced great pork ourselves. At the same time the packers sold our pork to US buyers at a premium because it was leaner as we fed a leaner type of animal while they were still raising 'lard-type' hogs.

[grassfarmer]

You seem to dismiss it f_s but I think it makes all the difference in the world who runs the beef industry. This is an obvious case of packer manipulation - given the chance they will always import just enough cheap beef from less developed countries to destabilise the price in their domestic marketplace.
I don't think for a minute American producers or politicians believe they have a duty to see the "north American" beef industry prosper - indeed the idea that such an integrated market exists is largely a figment of the imagination of Canadian producer groups like ABP/CCA who kid themselves that we are equals and good trading buddies with the Americans. We are enslaved to the US through their packer control of our cattle slaughter and are seen as entirely disposable should there be a better opportunity to exploit Brazilian, Mexican or any other nationality of producer. This is the reality of "global markets".

[farmers_son]

I think the Americans are guided by their own best interest and I was trying to show how trade with Canada is in their best interest.

The cattle and beef industries are controlled by a marketplace and the players in that industry include primary producers, packers, governments too. We should not overlook the further processors, wholesalers, exporters, retailers and consumers. I think it would be wrong to suggest the packers totally run the entire industry and they really cannot charge all they want for the beef that comes out of their plants. Just as the further processors cannot import all the cheap off shore beef they would like without paying a 25% tariff (similar in both U.S. and Canada) if they exceed the TRQ.

Our packers are global in scale. All the more reason producers in the U.S. would want to partner with neighbouring producers like Canada who have a similar production cost structure. I have said it before but it bears repeating, U.S. cattle producers will not be successful in raising the price of their live cattle by creating non tariff trade barriers that lower the price of live cattle next door in Canada. The best thing for a U.S. cattle producer is to have high live cattle prices in Canada so the packers cannot use us as pool of cheap cattle. The same logic applies to Canada as it is not in our interest to see lower live cattle prices in the U.S. It is in all our best interest to see live cattle prices as strong as possible.

Did I mention Canada is the U.S. largest export market for beef? The U.S. is erecting non tariff trade barriers to live Canadian cattle and beef through COOL. The shortfall in the U.S. market is being filled by cheaper Australian rooburger at the same time as U.S. exports of quality cuts to Canada are threatened. I just have to shake my head in disbelief.

And lets not forget the U.S. packing plants that will not be able to stay in business without needed Canadian live cattle to help cover their fixed costs.

[Willowcreek]

With the Democrats now in total control- I think you will see M-COOL expanded to all meat- including restaurant and institutional..The consumers are demanding to know where the food they eat comes from- which really came to light with all the tainted Chinese, Asian, and Mexican products..

There is a major push developing to buy American- and support and bring back American jobs and industry...

Like I've said for years and predicted on here - there was a Backlash building in the US against this wide open trading and globalism-- and it showed in the elections in 06 and again now on Nov. 4th....

{"The American people are slow to wrath, but once that wrath is kindled, it burns like a consuming flame." ~Theodore Roosevelt}

[grassfarmer]

"The shortfall in the U.S. market is being filled by cheaper Australian rooburger at the same time as U.S. exports of quality cuts to Canada are threatened."
Is that the thinking of ABP? - that we have the best beef in the world and the Australian product is garbage? Perhaps you should think on that - who has identified 100 DNA markers in their beef cattle and who is still working to identify their first? Which country is successfully and aggressively expanding their beef exports and which is really struggling?

[grassfarmer]

Willow, Your consumers may be demanding to know where their food comes but your packers have a vested interest in not revealing that. Your packer/NCBA/ Government coalition usually win the day so I guess the consumer will remain in the dark.

I'm interested in this "Backlash... against this wide open trading and globalism" does that mean your country is considering withdrawing its imperialist forces, the US based global corporations that ruin the lives of so many primary agricultural producers around the world, back to within your own borders?
That would truly be a great day for the world. I fear that's not what you mean though - more likely it will be to take a more protectionist stance against imports whilst attempting to screw over even more other countries in trade agreements and increase your exports through the aforementioned US based global corporations.

[Willowcreek]

grassfarmer- If you've paid any attentions to our elections- you'll know that the Republicans have got their arses kicked out of control big time in the last two elections...

And its been some of these same Republicans that, like the NCBA, have been in the Packers pockets...A lot of their power went out the door..

Even the new Secretary of Agriculture was coming around to the pressure put on by the public and Congress- and on Jan 20th we will have a new Secretary of Agriculture to lead the direction for the USDA...
The President-elect, Obama, is already looking over 2000 executive orders signed by Bush to decide if he will invalidate or reverse them...
The country gave him a mandate- they want a complete "CHANGE" in direction..

[farmers_son]

Willowcreek: You and all Americans should read up on the causes of the Great Depression:

http://en.wikipedia.org/wiki/Great_Depression_in_the_United_States

"The Great Depression in the United States began on "Black Tuesday" with the Wall Street crash of October, 1929 and rapidly spread worldwide. The market crash marked the beginning of a decade of high unemployment, poverty, low profits, deflation and lost opportunities for economic growth and personal advancement in the United States. Although its causes are still uncertain, the basic cause was a sudden loss of confidence in the economic future. The traditional explanation is a combination of high consumer debt, ill-regulated markets that permitted malfeasance by banks and investors, cutbacks in foreign trade, and growing wealth inequality, all interacting to create a downward economic spiral of reduced spending and production. The initial government response to the crisis exacerbated the situation; protectionist policies like the 1930 Smoot-Hawley Tariff Act, rather than helping the economy, merely strangled global trade. Industries that suffered the most included agriculture, mining, and logging as well as durable goods like cow and automobiles that people postponed."

More on the Smoot-Hawley Tariff:

http://en.wikipedia.org/wiki/Smoot-Hawley_Tariff_Act

The Smoot-Hawley Tariff Act (sometimes known as the Hawley-Smoot Tariff Act)[1] was an act signed into law on June 17, 1930, that raised U.S. tariffs on over 20,000 imported goods to record levels. In the United States 1,028 economists signed a petition against this legislation, and after it was passed, many countries retaliated with their own increased tariffs on U.S. goods, and American exports and imports plunged by more than half. In the opinion of most economists, the Smoot-Hawley Act was a catalyst for the severe reduction in U.S.-European trade from its high in 1929 to its depressed levels of 1932 that accompanied the start of the Great Depression.[2][3]"

Grassfarmer: I do not speak for anyone or any group in these threads other than myself. You need to know that and it is wrong to imply otherwise. I never said our beef was the best and even if our beef was the best that would be need to be defined and put into context.

I do not think you can guage best by volumes of exports. Exports may be driven by low price.

The point I was trying to make was that, assuming the U.S. needs to import beef, the U.S. cattle producer would be far better off if that beef came from a country such as Canada which has a similar type of cattle and feeding system along with a similar cost structure than if that beef came from off shore and from countries with a lower cost structure such as Australia. I pointed out that Australia has seen a gain in market share with the introduction of COOL.

We need to remember that the U.S. did sign a FTA with Australia and that the U.S. producer should give some thought to which is better for them. Is it NAFTA and trade with Canada or trade with Australia and have to compete with a country that seems to be able to produce a fat grain fed calf for at least $400 less than a steer in the U.S.? I think the U.S. cattle producer would be better off seeking live cattle and beef trade with Canada than Austalia.

[grassfarmer]

OK farmers_son, I'm just so used to you advocating the ABP stance on nearly every subject that I have got into the mindset of thinking of you as being an ABP director or delegate at least. If you aren't I apologize.

However I stand by my point that it is wrong to imply that Australian beef is "rooburger" and automatically inferior to Canadian. That was why I cited the information about the DNA markers. You must surely agree that it is both wrong and foolhardy to underestimate our competitors like this?

[Willowcreek]

farmers_son-- I aware of the Smoot-Hawley-- but I personally think a severe Depression is unevitable already.. Bush was asleep for 8 years on the economy- and didn't wake up until it was already a disaster...
And I think its going to take an "America First" policy and program to bring us out of it...Putting US industry, workers, producers, infrastructure, etc. ahead of all these other nations and multinational corporations...Americans don't mind paying to build our own country- but are tired of dishing it out to build and support the industry and infrastructure of every country of the world..

I think besides a stronger M-COOL, you will see a Packer Ownership ban put in place- plus raised corporate taxes, that gives big exemptions for products/production within the US- to get many of the companies operating out of country to reinvest back into the US....And we may see some enforcement of the anti-trust laws to break up these huge corporations (like AIG) so we no longer have corporations that are too big to allow to fail.. This could affect the Packer monopoly..There is already 20 some State Attorneys signed onto the court action to keep JBS Brazil from buying up some of the US packing...
We will also see a lot more money put into alternative forms of energy- including ethanol and bio diesel- which will mean grain crops will rule...A lot bigger push to organic and grass fed cattle too..
Thats just a little of the direction change I see possible..

[kato]

If you want corporations to take their business outside your borders, just raise corporate taxes. That'll do it. Why would they invest in America if the cost of business is raised? Think about it. It was your high dollar that got them going internationally in the first place, and now that it has come down a bit, the higher taxes will keep the momentum going.

I would also think that Obama has much higher priorities than MCOOL. America has much bigger problems than labelling food products. Like making sure people can afford to actually buy food.

I was reading an article yesterday that speculated that if the current Ag secretary doesn't finalize MCOOL before the inaugeration that it won't happen for many more months. Simple logistics of a change in administration will put it off.

As well, there is the fact that promises made during elections will always get a sober second look afterward.